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INCOME TAXES | 12 Months Ended
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Dec. 31, 2012
INCOME TAXES |
INCOME TAXES | 9. INCOME TAXES The income tax expense on income from continuing operations for each of the three years in the period ended December 31, 2012 consisted of the following (in millions):
|  | 2012 |  | 2011 |  | 2010 |
Current: |  |  |  |  |  |  |
Federal |  | $ | 38.9 |  | $ | 26.5 |  | $ | 38.1 |
State |  | 3.2 |  | 1.8 |  | 5.4 |
Total |  | 42.1 |  | 28.3 |  | 43.5 |
Deferred |  | (9.1 | ) | (3.2 | ) | 3.2 |
Provision for income taxes |  | $ | 33.0 |  | $ | 25.1 |  | $ | 46.7 |
Income tax expense for 2012, 2011, and 2010 differs from amounts computed by applying the statutory federal rate to income from continuing operations before income taxes for the following reasons (in millions):
|  | 2012 |  | 2011 |  | 2010 |
Computed federal income tax expense |  | $ | 29.7 |  | $ | 24.9 |  | $ | 41.2 |
State income taxes |  | 0.5 |  | 1.4 |  | 5.0 |
Deferred tax adjustment |  | (1.4 | ) | — |  | — |
Separation costs |  | 1.7 |  | — |  | — |
Unrecognized tax benefit |  | 1.5 |  | — |  | — |
Other — net |  | 1.0 |  | (1.2 | ) | 0.5 |
Provision for income taxes |  | $ | 33.0 |  | $ | 25.1 |  | $ | 46.7 |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 of each year are as follows (in millions):
|  | 2012 |  | 2011 |
Deferred tax assets: |  |  |  |  |
Benefit plans |  | $ | 54.0 |  | $ | 52.5 |
Insurance reserves |  | 9.7 |  | 7.8 |
Allowance for doubtful accounts |  | 1.7 |  | 1.9 |
Reserves |  | 1.7 |  | 2.5 |
Other |  | 0.3 |  | 1.9 |
Total deferred tax assets |  | 67.4 |  | 66.6 |
Deferred tax liabilities: |  |  |  |  |
Basis differences for property and equipment |  | 292.6 |  | 301.1 |
Capital Construction Fund |  | 3.3 |  | 3.3 |
Joint ventures and other investments |  | 3.8 |  | 6.0 |
Deferred revenue |  | 10.9 |  | 8.0 |
Amortization |  | 2.1 |  | 2.0 |
Total deferred tax liabilities |  | 312.7 |  | 320.4 |
Net deferred tax liability |  | $ | 245.3 |  | $ | 253.8 |
The Company’s income taxes payable has been reduced by the tax benefits from share-based compensation. The Company receives an income tax benefit for exercised stock options calculated as the difference between the fair market value of the stock issued at the time of exercise and the option exercise price, tax effected. The Company also receives an income tax benefit for non-vested stock when they vest, measured as the fair market value of the stock at the time of vesting, tax effected. The net tax benefits from share-based transactions were $1.3 million and $0.6 million for 2012 and 2011, respectively, and the portion of the tax benefit related to the excess of the amount reported as the tax deduction over expense was reflected as an increase to additional capital in the consolidated statements of shareholders’ equity. In connection with the Separation, the Company incurred certain financial advisory, legal, tax and other professional fees, a portion of which is not deductible under the tax regulations. Accordingly, the Company’s income taxes for the year ended December 31, 2012, were increased by approximately $1.7 million, related to the non-deductibility of certain Separation costs. Also in connection with the Separation, the Company entered into a Tax Sharing Agreement with A&B that governs the respective rights, responsibilities and obligations of the companies after the Separation with respect to tax liabilities and benefits, tax attributes, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns. A&B has liability to Matson with respect to Matson’s consolidated or combined U.S. federal, state, local and foreign income tax liability for the taxes that are attributed to A&B’s businesses and relative contribution to state and other taxable income of the Matson consolidated or combined group relating to the taxable periods in which A&B was a part of that group. The Tax Sharing Agreement specifies the portion, if any, of this tax liability for which Matson and A&B will bear responsibility, and Matson and A&B agreed to indemnify each other against any amounts for which they are not responsible. Under the Tax Sharing Agreement, Matson also generally will be responsible for any taxes that arise from the failure of the Separation, together with certain related transactions, to qualify as tax-free for U.S. federal income tax purposes within the meaning of Sections 355 and 368 of the Code, to the extent such failure to qualify is attributable to actions, events or transactions relating to Matson’s stock, assets or business, or a breach of the relevant representations or covenants made by Matson in the Tax Sharing Agreement, the materials submitted to the Internal Revenue Service in connection with the ruling request relating to the Separation or the representation letter provided to counsel in connection with such counsel’s issuance of a tax opinion relating to certain aspects of the Separation. In addition, each of Matson and A&B generally will be responsible for a portion of any taxes that arise from the failure of the Separation, together with certain related transactions, to qualify as tax-free for U.S. federal income tax purposes within the meaning of Sections 355 and 368 of the Code, if such failure is for any reason for which neither Matson nor A&B is responsible. The Tax Sharing Agreement also imposes restrictions on the respective abilities of Matson and A&B to engage in certain actions following the Separation. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):
Balance at December 31, 2009 |  | $ | 2.7 |
Additions for tax positions of prior years |  | — |
Additions for tax positions of current year |  | 1.1 |
Reductions for tax positions of prior years |  | (0.3 | )
Reductions for lapse of statute of limitations |  | — |
Balance at December 31, 2010 |  | 3.5 |
Additions for tax positions of prior years |  | 0.3 |
Reductions for tax positions of current year |  | (0.5 | )
Reductions for tax positions of prior years |  | — |
Reductions for lapse of statute of limitations |  | (0.7 | )
Balance at December 31, 2011 |  | 2.6 |
Additions for tax positions of prior years |  | 4.0 |
Additions for tax positions of current year |  | 3.7 |
Reductions for tax positions of prior years |  | (1.0 | )
Reductions for lapse of statute of limitations |  | (1.0 | )
Balance at December 31, 2012 |  | $ | 8.3 |
The Company increased its unrecognized tax benefits by $4.0 million based on Matson becoming the primary taxpayer for all unpaid tax positions prior to Separation. The $4.0 million represents the Former Parent Company’s liability which will be repaid to Matson through an indemnification agreement with A&B. Of the total unrecognized benefits, $8.3 million $2.6 million and $3.5 million, at December 31, 2012, 2011 and 2010, respectively, represent the amount that, if recognized, would favorably affect the Company’s effective rate in future periods. The Company does not expect a material change in gross unrecognized benefits in the next twelve months. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. To the extent interest and penalties are not ultimately assessed with respect to the settlement of uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision. Interest accrued related to the balance of unrecognized tax benefits totaled $0.4 million as of December 31, 2012, and $0.2 million as of December 31, 2011 and 2010. The Company is no longer subject to U.S. federal income tax audits for years before 2009. The Company is routinely involved in state and local income tax audits. Substantially all material income tax matters have been concluded for years through 2007.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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